Q&A: Leader of Nationwide Pension Risk Transfer discusses drop in first-half industry sales

Q&A: Leader of Nationwide Pension Risk Transfer discusses drop in first-half industry sales

For the second consecutive quarter, activity in the pension risk transfer (PRT) market declined, resulting in sales of $11.5 billion through 2Q, a 56% decrease year-over-year, according to LIMRA's U.S. Group Annuity Risk Transfer Survey. While the industry is off to a slower start compared to the last few years, which was widely anticipated by most industry insiders, Nationwide's head of PRT, Paula Coleexpects marketplace activity to pick up in the second half of the year. Despite this expected boost, total sales are likely to remain lower than in 2024. Cole breaks down what's behind the dip in sales, why she expects to see more transactions later this year and how advisors can help their plan sponsor clients navigate the current environment.

Q. What has caused PRT sales to drop in Q1 and Q2?

Cole: During the first quarter of 2025, the marketplace only posted sales of $7.1 billion on 127 transactions - a 51% decrease from Q1 2024 sales and a 13% decrease in the number of total transactions. The industry was facing a perfect storm - market volatility, the possibility that escalating trade wars could lead to a recession and the threat of pending lawsuits. These challenges have persisted in 2Q, causing many plan sponsors to wait to make any de-risking moves, leading to a drop in industry activity.

However, we have seen some plan sponsors start to address these challenges by pivoting from traditional buy-outs to buy-ins - although buy-in sales are still down year over year. In a buy-out, plan sponsors transfer all or a portion of a pension plan, including assets and liabilities, to an insurer who issues an annuity contract directly to participants and pays benefits, removing liabilities from a company's balance sheet. In a buy-in, plan sponsors purchase an annuity contract from an insurer that is held by the pension plan as an asset while liabilities remain on the plan sponsor's balance sheet. Buy-ins are an option that offer plan sponsors with well-matched assets and liabilities the ability to lock in current pricing, making them an attractive choice in today's market environment.

We've also seen larger plan activity return in 2Q, although we're not likely to see these deals finalized until closer to the end of the year. In addition to the market concerns I mentioned earlier, I believe many plan sponsors in this space were waiting to see how the new administration's policies, legislative and regulatory agendas would take shape before making any moves in the first quarter. Although there is still uncertainty around how certain policies - tariffs for example - will impact future market conditions, plan sponsors seem to have more optimism about the current environment, although some are still hesitant to de-risk amidst multiple ongoing PRT industry lawsuits.

Q. What industry risks should advisors be watching for in the second half of the year?

Cole: Much of the uncertainty that emerged in the first half of the year will still be present in the second half of 2025. Lingering market volatility, the risk of a recession and potential interest rate cuts could decrease pension funding, leaving plan sponsors with fewer de-risking options. At this time, Nationwide's Office of Economics believes the Fed will lower interest rates by an additional 50 basis points by year-end following the 25-basis point rate cut last week.

Additionally, several different lawsuits regarding PRT providers are still working their way through the legal system. While these suits target specific features of some carriers or unique transactions, we believe in the continued strength and security of the PRT market under the guidance of the Department of Labor.

Q. Although sales are down, the PRT market has seen an increase in the number of providers over the last several years. Is that growth still occurring?

Cole: PRTs have become increasingly popular over the last decade as a tool to protect plan participants' future pension payments. The number of financial services companies offering these transactions has more than doubled in the last 10 years with 22 carriers currently offering PRTs, each specializing in different segments across the industry.

As the market has grown, providing a more competitive landscape for companies looking to offload their defined benefit plan liabilities, plan sponsors have grown more confident in PRT providers, becoming repeat customers with companies who deliver exceptional experiences through pricing, reputation, security and customer service. For example, at Nationwide, we've seen an increase in the number of plan sponsors completing repeat PRT transactions with us. We've been fortunate to work with various plan sponsors on back-to-back cases due to their selection of Nationwide as a preferred partner.

Q. The first half of the year has been pretty tumultuous for advisers who work with plan sponsors on PRTs. What advice do you have for them as we close out the year?

Cole: Don't let the slower start to the year frustrate you. Although we're experiencing a dip in sales, we expect PRT demand to increase as we head into the second half of the year. However, it's important to remember this increase likely won't be enough to fuel another record-breaking year.

Help your clients work through the uncertainty caused by today's volatile markets. If a PRT is affordable and beneficial for the business, don't let lingering litigation and market volatility hold them back from doing what is in their best interest.

You can also use this time to help them review their data and prepare for future transactions. Verify benefit amounts, primary and contingent annuitants and key information. Ensure plan sponsors have their information digitized for more seamless future transactions. The better the data, the better the experience when it comes to de-risking.

RTM-0172AO

09/2025